Home/Blogs/Need to Know About Cryptocurrency and Taxes

Need to Know About Cryptocurrency and Taxes

05 Jan 2023

The fear among new-age traders, in the recent past, has been brewing about cryptocurrency being banned in India. However, in the latest announcement by the government, it was indicated otherwise as the government stated that there would be a new tax on cryptocurrency. Almost simultaneously, however, the Department of Finance came out with the news of the introduction of a ‘digital rupee’ within 2022. 

Crypto is Legal, But with Crypto Tax

On 1 February 2022, the Finance Minister of India, Nirmala Sitharaman, stated the Indian government would levy a 30 percent tax of capital gains on every cryptocurrency trade made. Furthermore, the minister announced  that the tax on cryptocurrency trading would be without deductions or exemptions allowed, barring the “acquisition cost”. The minister added that any loss as a result of fraud/theft arising from accounts that were hacked would not be covered either. Regarding the relationship between crypto and taxes, the outlook looks bleak for traders. Traders won’t be able to offset profits with losses. This new tax will apply to gifts of cryptocurrency also, and in addition to all this, any cryptocurrency transactions will attract a TDS (tax deducted at source) of 1 percent. 

Hitting Hard at Cryptocurrency

The announcement made by the Finance Minister, as part and parcel of the 2022 Indian Budget presentation, was obviously greeted with a blend of reactions, most veering towards pessimism. Some eminent individuals, though, to name one, Nischal Shetty of one of India’s largest exchanges (a base of 7.3 million clients), WazirX, expressed some relief that the new rules on cryptocurrency taxes provided a semblance of positive clarity on crypto regulations in the future. Contrastingly, and perhaps voicing the view on behalf of many crypto fans, the former Secretary of Finance, Subhash Chandra made a comment to the effect of “the party” seeing its end. 

India and Its History of Crypto

India has had a somewhat muddlesome cryptocurrency history. Additionally, it has been brief with the Finance Ministry comparing crypto to ‘Ponzi schemes’. Why? Because government officials stated that cryptocurrency had no standing and would prove risky to traders. In the same year, the Reserve Bank of India brought out rules that prohibited all banks from working with exchanges dealing in cryptocurrency. In 2020, this regulation was repealed by the Indian Supreme Court. Hence, there was an indication of the slow, but sure acceptance of cryptocurrency. Whether seen as negative or positive, the new crypto tax announcements have sealed cryptocurrency’s future in India, so to speak. 

The Tax on Cryptocurrency Defined

So, how will cryptocurrency gains be taxed? The Indian government has clearly defined a term to do with crypto taxation, ‘virtual digital assets’. This is broadly meant to include any kind of asset related to crypto, like a few of the following: 

  • Any ready form of money, like Bitcoin
  • Open Blockchain Tokens (Eg. WRAP or Wrapped Asset Token)
  • Application Coins (Eg. Filecoin)
  • Security Tokens (Eg. Exodus)
  • Non-fungible tokens or NFTs (Eg. Crypto Kitties)

Find Out More

In case you wish to trade in cryptocurrency and want to know more about this novel asset that everyone is raving about, visit Motilal Oswal, one of India’s premium brokers. You can start trading and learning at the same time.

Related Articles: How to Open a Demat Account Without a Broker | Factors to Keep in Mind While Opening a Demat account | Factors to Consider When Opening a Demat Account | 10 Points to Remember When Operating your Demat Account | Types Of Demat Account & Trading Account

Checkout more Blogs

You may also like…

Get Exclusive Updates

Be the first to read our new blogs

Intelligent investment insights delivered to your inbox, for Free, daily!

Open Demat Account
I wish to talk in South Indian language
By proceeding you’re agree to our T&C
setTimeout(function() { }, 5000);